In our first article
leading up to the march for universal suffrage on Sunday, we look at the
failure of HK's Government to abolish the small-circle corporate voting
system which secures business dominance of the Functional Constituencies and
a veto in LegCo. We illustrate it with an investigation of the Transport
constituency electorate.

Corporate Voting in HK Elections
28th November 2005

In the Government's
proposals for electoral reform, it did absolutely nothing
to abolish the small-circle corporate voting system used in many of the so-called
Functional Constituencies (FCs) which comprise half of Hong Kong's current 60-member
Legislative Council. The same corporate electorates also elect many of the
members of the Election Committee (EC) which chooses the Chief Executive
of Hong Kong. Indeed, under the proposals, 100 of the 800 new seats on the
expanded EC would go to the industrial, commercial and financial sectors which
are dominated by corporate voting.

Those FCs which allow corporate voting generally have very small 3-digit
electorates, the elections are often uncontested, and the FC legislators play a
crucial role in blocking the democratically elected members' motions in the
Legislative Council. That is because, under
Annex II of the Basic Law, in order to pass a member's motion, such as a
call for a competition law, or an amendment to a Government-tabled bill, a
majority is required of "both houses" - a majority in the 30 FCs, and a majority
in the 30 geographically elected constituencies. So it only takes 15 votes in
the FCs to block a motion.

Even the proposal to add 5 new FCs to be elected by District Councillors does
little to change this block. Under any realistic voting scenario, at least 1 and
probably 2 of the 5 new FC legislators would be pro-Government members and the
Government would only need 18 out of 35 FCs on its side. We think it's likely
that the Government will come up with some token concessions on the electorate
for the proposed District Council seats to try to head off the pro-democracy
march on Sunday, but the retention of corporate voting in the FCs is reason
enough to march
anyway.

Those vested interests in Hong Kong who are calling for a bicameral (or
two-house) system as a purported form of universal suffrage are in reality
calling for maintenance of the existing system in which business interests carry
a veto in the "upper house". Going down this road would take Hong Kong no
further towards a true democratically elected legislature accountable to the
people.

Since the National People's Congress Standing Committee (NPCSC)
published its
decision of 26-Apr-04, the HK Government has taken to using the phrase
"balanced participation" - a euphemism for keeping the business-dominated
functional constituencies (whatever they are subsequently called), and ignoring
the fact that prosperous and stable societies are positively correlated with
universal suffrage. What could be more "balanced" than one vote per person?

The NPCSC decision said:

"Any change...shall conform to principles such as being compatible with
the social, economic, political development of Hong Kong, being conducive to
the balanced participation of all sectors and groups..." (emphasis
added)

What this "balanced participation" is really about is the fact that the
mainland and HK Governments have more influence over business and special
interests than they do over the population at large. After all, the
profitability of businesses often depends on the terms of government licenses,
regulations, permits, land leases, laws, taxes and subsidies. In return, through
the FC system, Government can count on the support of business interests in the
Legislative Councils and in the CE elections.

To be sure, in almost any democracy, there are strong, well-financed
corporate and special-interest lobbies, and depending on the quality of campaign
finance laws, they can be very influential on government policy, but the
difference is that they are nothing more than lobbyists without a vote of their
own, and ultimately those democratically elected governments have to make
policies that as a whole are acceptable to the public who elect them by
universal suffrage, or they won't win re-election. By contrast, the HK
Government's mandate, and its support in the Legislative Council, is dependent
on just a tiny fraction of the population who control the corporate and special
interest votes.

Within the 30 FCs, some "professional" FCs are elected by thousands of
individuals, such as the legal, medical and accounting sectors. It is no
coincidence that these sectors, with large electorates, tend to produce
pro-democracy legislators. So the Government and the business lobby rely on the
FC legislators who are elected through corporate voting to counter this weight.

The NPCSC interpretation

The controversial 26-Apr-04 decision of the NPCSC and the earlier procedural
decision of 6-Apr-04 in essence re-wrote the Basic Law, which
says, in relation to any changes after 2007 to the method of electing the
Legislative Council and to procedures for passing bills and motions, that
changes only have to be reported to the NPCSC "for the record". So here
is a quick linguistic guide to the Basic Law:

Phrase

NPCSC's interpretation

"if there is a need"

the Chief Executive must tell us there's a need, then we'll decide
whether he is right, and set conditions on reform

"for the record"

only if it meets our conditions

"gradual and orderly progress"

make the minimum amount of progress that the people will tolerate

"balanced participation" (you won't find that in the Basic Law)

we've got more leverage over the tycoons than we have over the
people

Perhaps what Beijing fears most is not democracy in Hong Kong, but a
successful democracy in Hong Kong, because it would increase public pressure
in the mainland for democratic reforms of its own and an end to one-party
authoritarian rule with all the corruption, economic mismanagement and
oppression of free speech that goes with it. At the same time, however, they
must recognise that if hundreds of thousands of Hong Kongers repeatedly take to
the streets in a peaceful demand for the right to elect their own leaders, then
the path of least resistance will be to give them what they want.

Not Progressive

Attempts by the HK Government to portray the latest electoral reform
proposals as "progressive" or in the
words of Henry Tang"actually more progressive than the 1995 electoral
arrangements" ignore the fact that the FCs had far more representative
electorates in 1995, when the Patten administration tabled legislation which
allowed anyone who worked in a sector to register and vote in it.

That was the reason that Beijing derailed the so-called "through train" of
the 1995 Legislative Council, replacing it on the 1-Jul-97 handover day with a
hand-picked council and then amending the election laws to return to the old
corporate voting system from 1998 onwards.

Case study: the Transport Constituency

To demonstrate just how crooked the system is, we took a look at the
Transport Constituency, where the 191 eligible electors are helpfully listed on page 4 of
this document, and cross-matched it with our database, annual reports and
other sources to tell you who pulls the strings on these electors, that is,
their owners. We also look at the extraordinary proliferation of associations,
many of which must have overlapping memberships and each of which gets one vote.

Of the 191 eligible electors, only 182 of them actually appeared in the
2004 Provisional Register for the Legislative Council elections. However, we
can't tell you who did or didn't participate, because the electoral register is
not a published document. It is available for public inspection, but you will
break the law if you try to use it "for a purpose other than a purpose
related to an election". You can't take copies, and it is a grey area,
untested in court, as to whether research on a specific election or on electoral
systems in general is a "purpose related to an election". Just to look at
the register, you have to sign a declaration like
this one.
This is an example of the secrecy that surrounds the debate on electoral reform.

Apart from their legislator, the electors of the Transport constituency also
elect 12 of the 800-member Election Committee.

Stacking the vote

The Government's system of allocating 1 vote
to each association or company in an industry naturally incentivises the
creation or registration of new associations or companies in a sector, even if
it is the same people behind them. The number of registered electors in the
Transport constituency grew from 137 in 1998 to 152 in 2000 and 182 in 2004, and
it cannot be said that the number of people involved in the transport sector
grew that much in the same period. Whether an association or company is admitted
to the list is initially determined by the Government tabling an amendment bill
to the Legislative Council. There is no relationship between the number of
employees, turnover, net assets or any other business statistic and the number
of votes a company or association has.

We found that of the 191 eligible Transport electors, 36 are taxi-related
associations, 19 are minibus associations and 10 are driving instructor
associations. These three lobbies alone amount to 65, or over one third, of the
electorate. Bear that in mind next time you hear their legislator whinging about
diesel duty being too high, when it is
far lower than the duty on unleaded petrol which private motorists pay, and
when LPG is exempt from duty and franchised buses are exempt from diesel duty
anyway. And don't forget the $1.4bn in taxpayer grants handed out to get the
taxi and minibus owners to buy LPG vehicles in the first place. Yes, in Hong
Kong, we don't charge the transport trade for air pollution, we pay
them to reduce it.

The names of some trade associations suggest
overlapping membership through their geographic coverage. While some of the
apparently overlapping trade associations may exist separately for historical
reasons, others may have come into being, or stayed separate, simply to claim another vote for their
sector. Similarly, companies under common ownership may continue to exist
separately rather then undergo a full merger, and thereby avoid
losing voting rights in the constituency.

Our research also identified tycoons with heavy voting interests, including 1
family with stakes in 11 electors. We also found 3 electors which are controlled
by the HK Government, and several which are controlled by overseas Governments,
including Dubai, Singapore and of course mainland China.

It's worth reminding our readers that we only looked at one sector. If we had
extended our coverage to sectors such as the Real Estate, Hotels, Hong Kong
General Chamber of Commerce, Chinese General Chamber of Commerce and others,
then we would have found many of the same tycoons controlling corporate electors
in those sectors too.

Elector Groups

HK Government

Yes, the HK Government actually has 3 votes in this sector - which sullies
the separation of the Executive and Legislative branches of our government.

Shareholder

Elector

Stake

Govt

Airport Authority of Hong Kong

100%

Govt

Kowloon-Canton Railway Corporation

100%

Govt

MTR Corporation Ltd

>76.46%

Note: the Government refuses to disclose its aggregate holdings in the
MTRC, claiming immunity from the
disclosure provisions of the Securities and Futures Ordinance.

Cheng Yu Tung

NWS Transport Services Ltd (NWSTS) is
50% owned by NWS Holdings Ltd (NWS, 0659) and 50% by privately-held Chow Tai Fook Enterprises Ltd. Both are
ultimately controlled by Cheng Yu Tung. NWSTS owns 29.98% of Kwoon Chung Bus
Holdings Ltd (KCB, 0306). In the case of one "New World" elector, we were
unable to determine whether it is part of the group, and this is indicated by a
question mark below.

The Swire Family

Family trusts control unlisted John Swire & Sons Ltd which controls 67% of
the voting rights in Swire Pacific Ltd (SP, 0019,0087), which owns 66.7% of Swire Aviation Ltd (SA).
The other 33.3% is held by CITIC Pacific.

China Merchants Shipping & Enterprises Co Ltd,
an elector, is a subsidiary of
China
Merchants Logistics Group Co Ltd, owned by the mainland Government. The same
group also controls China Merchants Holdings (International) Co Ltd (0144),
which has a 20% stake in AAT.

Taxis, minibuses and driving instructors

There is a gaggle of electors who are
associations of taxi owners, drivers, operators, servicers and so on. The
membership of these associations is unlikely to be mutually exclusive - i.e.
some people, or companies, are probably members of multiple associations. It is
beyond the scope of this article to investigate that.

Here's a list of 36 Taxi voters:

Association of N.T. Radio Taxicabs Ltd (The)

Chuen Lee Radio Taxis Association Ltd

Fraternity Association of N.T. Taxi Merchants (The)

Fraternity Taxi Owners Association

Happy Taxi Operator's Association Ltd

Hong Kong & Kowloon Radio Car Owners Association Ltd

Hong Kong and Kowloon Rich Radio Car Service Centre Association Ltd

Hong Kong & Kowloon Taxi Companies Association Ltd

Hong Kong Kowloon Taxi & Lorry Owners Association Ltd

Hong Kong Tele-Call Taxi Association

Kowloon Taxi Owners Association Ltd (The)

Lantau Taxi Association

N.T. Taxi Merchants Association Ltd

N.T. Taxi Owners & Drivers Fraternal Association

N.T. Taxi Radio Service General Association

N.W. Area Taxi Drivers & Operators Association

North District Taxi Merchants Association

Quadripartite Taxi Service Association Ltd

Rambo Taxi Owners Association Ltd

Sai Kung Taxi Operators Association Ltd

Sun Hing Taxi Radio Association

Tang's Taxi Companies Association Ltd

Taxi Associations & Federation

Taxi Dealers & Owners Association Ltd

Taxi Drivers & Operators Association Ltd

The Taxi Operators Association Ltd

Taxicom Vehicle Owners Association Ltd

United Friendship Taxi Owners & Drivers Association Ltd

Urban Taxi Drivers Association Joint Committee Co Ltd

Wai Fat Taxi Owners Association Ltd

Wai Yik H.K. & Kowloon and New Territories Taxi Owners Association

Wing Lee Radio Car Traders Association Ltd

Wing Tai Car Owners & Drivers Association Ltd

Yik Sun Radiocabs Operators Association Ltd

Rights of Taxi Owners and Drivers Association Ltd

Hong Kong Taxi and Public Light Bus Association Ltd (The)

The last of the voters named above is a joint
association between taxi and public minibus people. Here is the list of 19 minibus
voters:

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